All Forum Posts by: John Mireles

Here's my story:

Found a great set of three units being sold for less than the market value. To get to the head of the line, I didn't use a buyers agent and went directly to the seller's agent so that he'd get both sides of the commission. My ploy worked and my offer was accepted ahead of a cash offer and a higher offer. (The agent had loaned money on the property so he got to pick the buyer.) To make things easier, I'd agreed to use the agent's loan broker so if there were any problems with the loan process, it would be his guy at fault.

Funny thing happened along the way. The seller countered with $7,000 in cash back that could only be used for closing costs. I didn't ask for it, but what the heck. I'll take free money any day.

Because the $7,000 couldn't be used to get cash back, it was to be used to buy down the interest rate. Great. But when the time came to sign loan docs, I noticed that the rate had not been lowered. I was getting the same deal as though I was going in with no points down.

At that point I realized that the agent and broker had conspired to take off with the extra cash. They figured that I wouldn't catch that the interest rate hadn't been reduced since it wasn't really my money to begin with. Once I realized what was going on, I got the broker on the phone and chewed him out like a regular Al Pacino Scarface. ("F#ck me! No f#ck you!" I swore at the SOB.)

The guy was sweating bullets. He knew he could lose his license - or even end up in jail. The agent tried to calm me down. Played me like I was a chump. I knew he was in it up to his eyeballs but I couldn't prove anything. Besides, it wasn't his *** on the line since it looked like the loan broker's doing.

Anyhow, the loan broker offered to give me the lower rate and messenger over a cashier's check for $8,000 if that would make me happy. I said it would so he did. Used that to pay for a sparkling new paint job for some pretty kick *** little units.

Is it possible that he took out an owner-occupied loan at some point but then used it to flip a property instead? Don't know if banks keep a list of those who've done that but it seems reasonable to me.

I don't have much to add other than I think it's probably too ambitious to think you can just pick up 20 properties in any sort of short term time frame. The investor market is pretty hot around here (the Southwest) right now. Anything that sniffs of investor potential is getting picked up pretty quickly - often with cash.

If you're serious about this, I'd consider a move to Phoenix so you can get a feel for the place and be more hands on. Lord knows $300k won't go far in Santa Barbara so you may as well head out to where you stand a chance. (Love SB though - graduated from UCSB.) That way you can buy your first property as an owner occupant and go in with less money. Just a thought.

Originally posted by Steven Del Prete:

@John Mireles the outside is definitely different but what you did on the inside is ver attractive. Well done

Actually, I can't take credit (nor accept blame depending on how you look at it) for the outside. I purchased the building with those colors.

When I redid this apartment, my assistant told me, "You should just paint it white because how do you know if the tenant will like your colors?" My answer was that any tenant that I wanted would like my colors. This unit recently went vacant. I had this rerented in about three days at a rate well above market for the area. Yeah, it would have rented if it was Navajo white, but not as fast and not for top dollar. Although this property is in a poorer neighborhood, I get a more upscale tenant because of how it shows.

The outside of the building isn't shy either.

Originally posted by Mary Joe:

I would like to know too, I could not find any bank that is investor friendly (via LLC), as soon as you tell them you want to use a LLC to own the property, they say no or they say you will have to go to commercial lender.

What's wrong with going to a commercial bank? If you're going to be in the borrowing business, it's a good idea to create a good connection with your lender. I like banking with a small/local business oriented bank since when it comes time to get commercial financing, you don't have so much bureaucracy to deal with. Having a relationship with the bank makes it easier for them to say yes to your loan.

First let me say good job on finding a reliable source of paint for cheap. But, if you're just painting every house and every room with the same white, you're leaving money on the table. I don't even paint my rental units white, much less something I intend to sell.

Color has such a powerful impact on people that to not use color is to not use the most effective - and cheap - tool one has for making the buyer fall in love with the property. I'm not talking about garish tones - there's plenty of fairly neutral pain schemes out there that speak to buyers' aspirations. If you, the seller, can deliver a palette that matches what the buyer would love to do on their own but can't, you're guaranteed to sell that house for top dollar.

If you don't know what colors to use, try hiring a designer. If you're too budget conscious (pennywise pound foolish in my opinion), then at least go into the paint store and check out the many pamphlets and brochures they have with all the different colors. Now both Home Depot and Lowes sell little tester cans for less than $4. Buy a few and try the colors on your wall before you begin painting. Once you've decided on a color scheme, then you can replicate it with each house you do. Paint colors go in and out of style so you'll need to mix things up after awhile.

I obsess over color. To me, the color must be absolutely perfect. I'll pick out ten sample colors before I decide on a color. But I want the end effect to seem effortless. Each room makes its statement and the color sets the tone. For interior colors, I'm really liking the new Behr fan deck. For exterior, the Frazee fan deck. Not all paint decks are equal.

Yeah, it's work picking out paint, but dialing in the pain colors is a heck of a lot cheaper than anything else you can do.

Sorry Alex but I kinda chuckle when I read your posts. You're just so naive and innocent about this whole process. There's no way it would work in the real world. Not with the people you'll be hiring.

The first thing I'd recommend you do, if you don't already, is learn "construction Spanish." Things like: "Quiero tombar este parede." "Cuando puede empezar?" "Pinta este parede este color." You're in Bakersfield so the workers you'll be dealing with will definitely be speaking Spanish.

The way you're going to find people is by hiring one guy and then he'll bring in his amigo or hermano. Hire a painter and his "amigo puede hacer el techo." (His friend can do the roof.) And so on. That's how you'll assemble your crew.

You'll be surprised at how cheaply they can get things done. They work hard and they'll do good work - these are the same guys doing the actual work for the bigger GC's but you're hiring them directly. BUT, here's where things can get tricky. You have to directly manage their work. Some guys won't show up after a few days. They'll ask for pay when you don't expect it. You'll have to pay for all the materials since they never have cash. You'll probably even pay for their lunches.

This fancy formula of incentives and penalties and yada yada won't work at all. They'll do most of the work and then want to get paid on Friday so they can bring home the money to la esposa y su hija. Whether they'll show up on Monday is anyone's guess. The good ones do. Some you just find out about the hard way.

Sure you can hire the contractor with the F250 and his logo on the door. However, when you get a quote for $8,000 to replace a roof but the amigo of Roberto can do it for $2,000, guess who you're going to go with?

@Bill G. Whoa! Hold the judgment a bit. I take damn good care of my parents. I personally don't feel that an LLC is worth the expense but that doesn't mean I'm foaming at the bit or disorganized. It's a simple business decision based upon my parents' net worth. For them, having ample insurance is fine.

For taxes, they get the tax form from the bank for the mortgage interest info. We supply the tax preparer with whatever expense info they need and that's pretty much it. Probably just print out the Quickbooks information and send it over. (I don't actually handle the details - that's my bookkeeper's job.)

You can do an LLC if you choose. Here in CA, that's an extra $800 per year that I don't feel like spending. If it's cheap, no reason not to. Keep everything simple and transparent is my suggestion.